Seniors sue secretary of state for fraud compensation funds

A group of nearly 500 seniors is suing Secretary of State Debra Bowen, saying she denied fair payments from a fund meant to compensate victims of corporate fraud.

The plaintiffs from all corners of the state say they spent $10,000 or $15,000 for advice from a former attorney and radio show host who was sued by the attorney general’s office for misleading seniors.

Mark Redmond, a Sacramento attorney representing the seniors, says his clients are being victimized a second time as the secretary of state denies many of his clients' claims for compensation from a fund for victims of corporate fraud.

“I really feel like I’ve got a line of people at a soup kitchen, and for two years the secretary has been ... saying these people aren’t hungry enough,” said Redmond, who filed the lawsuit last month in Los Angeles County Superior Court.

Bowen spokeswoman Shannan Velayas said the office has been flexible and paid about 200 of Redmond’s clients a total of nearly $1.8 million.

“Secretary Bowen is a longtime victim rights advocate and … she has ensured that every valid claim to the victims rights compensation fund has been paid,” Velayas said.

Carolyn Carvajal of San Francisco is one of about 280 plaintiffs who’ve gotten no compensation.

Carvajal said that in 2005, she made the final installment of $14,999 in payments to James A. Walker’s Senior Care Advocates firm, which was based in Roseville, near Sacramento.

Carvajal said she and her husband were promised legal help with any social services they might need in the future. However, before she received any meaningful advice, she learned that Walker’s firm was going bankrupt.

“I sensed that it would all be downhill from there,” Carvajal said.

In 2008, after a four-year investigation, Walker reached a settlement with the state attorney general’s office that accuses him of abusing the Medi-Cal program by giving misleading advice to seniors. He encouraged them to file false claims to qualify for taxpayer-funded nursing home care, records [PDF] show. He also promised services “for life” even though his services ended with the bankruptcy.

Court records say Walker denied the allegations but agreed to a fine and settlement.

The state bar also revoked his license to practice law in 2010. An accusation says he acted unprofessionally by accepting flat fees from 70 clients for Medi-Cal estate planning services that he did not provide. Records also say he failed to refund the unearned fees.

Controversy over the fund's operation has led state Sen. Ted Lieu, D-Redondo Beach, to introduce a bill that would clarify victims fund rules and make it easier to get claims paid.

California Watch examined the fund last year and found that it denied the overwhelming majority of claims and spent about 1 percent of its holdings. The fund is supported by fees paid to the secretary of state's office when people file paperwork to start or continue corporations.

Velayas said that at the latest count, the fund has paid about $2 million to victims and approved an additional $648,000 to be paid. That leaves $3.8 million in the fund, which is the amount remaining after Gov. Jerry Brown borrowed $10 million to help balance the state budget.